Lawyers, in general, are terrible with money because they are so time-poor. It is a real issue because you end up working a lot, but not enjoying the fruits of your (very hard) labour.
Here are some things I wish I had more insight into when I was working in the corporate law world.
Work out your needs, not wants
A lawyer in my office once spent a whole month’s salary on a Chloe (sorry, Chloé) handbag. Yup, a handbag. In lawyer land, handbags might be classed as essentials, but they really are not.
There is a lot of pressure to look and dress the part if you work in a corporate environment. This means that a lot of people pour their savings into buying things they don’t need—and as one saying goes—to impress people they don’t even like.
I’m not discounting the fact that dressing up is a part of any corporate job. But in the land of diminishing returns—you get very little bang for your buck after a certain price point. That glorified receptacle for your keys, known as the handbag, has limited extra functionality after a certain point. (I might reconsider this comment if someone invents a flying handbag. Any woman who feels like they are “that crazy bag lady” will concur.)
Most lawyers wish they had a “get out of jail” card
Why does this matter? Let’s be real—I would go so far to say that 80% of lawyers would rather be doing something else with their life. At least not the daily grind. A very small percentage of lawyers actually love the ins and outs of their job, the long hours, the office politics and the stress. You can apply this to other white-collar professions operating on time-based billing. Ask almost any lawyer and you get the same story—”no, I can’t imagine doing this for the next 10 years, let alone 20″.
But it is hard to make the jump when you’ve grown accustomed to your paycheck. Worse, where your spending increases in tandem with your paycheck (the notorious income-spend bulge). Even those on the highest pay bracket are trapped with expensive mortgages, private school fees and overseas holidays. It is a First World problem, but enough to make you feel trapped in a golden cage.
When reality runs you over…
Lawyers don’t take enough time out to reflect on their current spending habits. Sometimes, it takes a health scare or defining life event to bring you back to reality.
For those who have never experienced this (I hope that you will never), it is the wakeup call that we sometimes need. It is at these critical moments that you realise a few things:
- #1: Life is too short to spend most of it being miserable.
- #2: Money is not everything, health is.
- #3: Your boss isn’t going to give you a replaceable body if you break down, you alone are responsible for it. Also that you are replaceable (with someone else).
- #4: You haven’t been investing or saving for a rainy day.
Health crises can happen to anyone, so what I am saying is relevant to most people. Lawyers, however, are particularly susceptible because of the long hours and constant stress.
Real freedom is about making conscious choices
Who wants real freedom? I can hear you all yell “yes”!
Who actually makes it there? The very few who make the conscious choice and effort.
I can’t tell you how to solve #1, #2 or #3 above. Only you will know what will make you happy. But I would like to tell you about the books I’ve read which can help with #4.
One way of getting to genuine freedom is to inspect your money habits. When I took a “career break” (a nicer term for “burnout”), I made sure that I read as much as I could about finance. It was embarrassing because I majored in Economics at university, but knew very little about personal finance basics. Admitting this was the first step to changing my outlook on money, which is still a work in progress.
Here are three of my favourite resources to date (I do not get any benefit from spruiking this):
- Motivated Money by Peter Thornhill – This is one of the books which I can say is earth-shattering. It is a very short read, which I’ve found often indicates that the author knows what they are talking about. Thornhill puts a spanner into the works on our common misconceptions about investing.
- The Barefoot Investor by Scott Pape, or read his blog. This is a practical book geared towards personal finance basics. Pape looks at concepts that appear to be “common sense”, but are not commonly applied.
- Aussie Firebug blog by an anonymous individual.
My personal opinion is that Motivated Money and The Barefoot Investor are the only two personal finance books that you will need. The Aussie Firebug blog is a bonus for those who want more insight into real people who are trying to get to “F.I.R.E”. Yes, so you have the freedom to fire yourself from your job—F.I.R.E = Financial Independence, Retire Early.
I have read various books to date and not all are on the money (ha). Many suggest making a budget or “finding your purpose”. The first is too time-consuming and difficult to manage. The latter is too airy-fairy to be useful in the real world.
The other books are derivative of the concepts covered in the two books and have little else to say. You know that a book is derivative when the author can’t give real-world examples backed up by data, or clear/practical ways of applying their method.
I have also been to a finance seminar that was in fact a plug for their advisory service, priced at $2,000 per pop (well, it’s less than the handbag). Whether you choose to have a financial advisor is a personal choice. In any event, there is no harm in reading those books I mentioned first. At least you’ll have the basic knowledge to start on your journey to genuine F.I.R.E!
NOTE: I am not giving you financial advice. You should consider your individual circumstances when making financial decisions, or speak to a financial professional.